The idea of car ownership has been becoming a sacred dream for the millennials and the baby boomers alike. Changing times and the ever-changing transport dynamics are turning four-wheelers into a necessity, and youngsters are keen to explore ways and means to access a car. The pandemic induced need to maintain social distance remains a challenge in public transportation, which has added to the urge. It is interesting to witness that we are staring at a plethora of options that address the idea of car ownership, be it purchasing a car at a dealership or a short-term subscription. Another lucrative, up and coming model is that of opting for a pre-owned vehicle.
A recently published report by Mordor Intelligence (2022-2027) pointed to a trend that indicated that people are now more than ever attracted to the pre-owned segment, setting a stage for a growth of 15.1% CAGR. While it is not a new concept, the present preowned car segment has ingrained several improvements and structures that were missing earlier. The preowned car ecosystem is on a boom and is here to stay. They have been getting significant attention as a reliable, tested and equally shiny alternative for first-hand cars.
However, apprehensions planted by people who had a compromising experience many moons ago are a hindrance. Owing to this, many Millenials are shying away from exploring them. The changing ecosystem and trends in the industry and the entry of start-ups and organised players are diligently tackling these prejudices. Breaking down the factors that can drive millennials closer to the used car ecosystem:
Lack of seller guarantee
The used-car ecosystem was synonymous with unorganised brokers who were negatively disrupting the segment. The unreliability, lack of certifications and proper checks made consumers hesitant to opt for this alternative. Few new organised players and start-ups have tried to solve the used car discovery by providing a basic inspection report and a limited warranty for 6-12 months. However, this comfort does not address key hassle areas around car ownership.
Missing financial ease
While seeking financial support from banks was impossible when people were dealing with unorganised brokers, the situation has improved a little with financing options available on select car brands sold by organised players and start-ups. Another primary problem is around the tenure of ownership. Millennials take a used car loan of an average duration of four years to save their cash flow, but the ownership trend suggests that the average ownership of a used car is only two years.
In such scenarios, they can’t sell their car after two years & foreclosing a loan needs upfront capital & taking NOC from the bank, which is a manual & problematic task. As we await further improvements, Millennials always have the option of leasing/subscribing to used cars, which requires them to pay a monthly rental amount like an EMI. However, they do not need to make any down payment.
Vehicle maintenance
Every prospective pre-owned car buyer looks for platforms that extend well functioning and certified pre-owned cars in addition to servicing and insurance management solutions. While many new start-ups are now addressing this issue, their expertise lies in scheduled service and cosmetic works. Electrical & Engine detailing is still a very grey area, which leads to high uncertainty around used car ownership.
Costings fluctuate drastically, which customers cannot control since they are not car experts and rely on third-party advice. On top of this, coordination with workshops/ insurance companies is time-consuming and a painful task. The subscription (Car as a service) option goes a step forward and provides a hassle-free experience to the consumer.
Options galore
Millennials are smart and aspirational, so they are attracted to platforms that offer multiple options. While they may not have the financial capacity to explore many options in the new car segment, they can opt for pre-owned cars that are comparatively cheaper. They can have their dream car at an affordable cost. Some platforms also offer subscription options which allow them to drive aspirational cars while leaving them with the possibility of changing their vehicles sooner than later.
The baby boomers and millennials are keen on leading an elegant lifestyle, and cars add to their style statement while providing them with ease of travel. Since they are in the early years of financial independence, they do not wish to get overburdened with huge car loans and thus, find pre-owned cars suitable for their requirements.
This article is authored by Tarun Lawadia, Founder & CEO, pumpumpum. All views are personal.
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